Paul Krugman Compares Bitcoin to Housing Bubble

Nobel Prize-winning economist Paul Krugman is warning that the ongoing mania surrounding Bitcoin threatens to dwarf the chaos created in the rise and fall of the housing market.

 

In an interview with Business Insider, Krugman dismissed Bitcoin by stating there has “been no demonstration yet that it actually is helpful in conducting economic transactions,” adding that the cryptocurrency developed a “mystique” and its price was rising because “partly, it's tied up with Libertarian stuff.” He also stated the overinflated value of Bitcoin was “even more obvious, I think, than the housing bubble was – and that one was, I thought, tremendously obvious.”

 

Krugman added that unlike housing, Bitcoin prices can “just hang there in mid-air for a long, long time” because the cryptocurrency is not tied to a physical commodity. “It's not like, you know, the housing crisis,” he continued. “If housing prices are unrealistic, then more housing gets built and you can see it. The cost of producing of new bitcoins has gone crazily high. So that's not going to happen. So, we're waiting for a Wile E. Coyote moment. You know, the cartoon physics: he runs off the edge of a cliff and it's only when he looks down and realizes there's nothing under him and he goes. So, we're waiting for that sort of thing to happen. And that can go on for a long time.”